Looking to start a new business in the Midwest? St. Louis remains among the top places to build your company.
That’s according to Chicago venture capital firm M25’s annual list of the Midwest's top startup cities, which shows some movement in the top five, though St. Louis' ranking held steady.
Here are the top 20:
1. Chicago
2. Minneapolis
3. Indianapolis, Indiana
4. Pittsburgh
5. St. Louis
6. Columbus, Ohio
7. Detroit
8. Ann Arbor, Michigan
9. Madison, Wisconsin
10. Cincinnati
11. Kansas City, Missouri
12. Cleveland
13. Louisville, Kentucky
14. Milwaukee
15. Bloomington, Indiana
16. Lafayette, Indiana
17(tie). Omaha, Nebraska
17(tie). Lexington, Kentucky
19. Akron, Ohio
20. South Bend, Indiana
The biggest change occurred in the top four with Indianapolis overtaking Pittsburgh in the No. 3 spot for the first time since the list was started in 2017.
M25 compiled its ranking based on three factors: startup activity (active startups, startup formation growth, number of exits and large outcomes), access to resources (how much local startups have raised from VCs, the number of local investors, incubators/accelerators, universities, government support and access to quality talent) and business climate (cost of living, labor costs and business-tax friendliness).
The rankings come after a big year for St. Louis' startup economy, with the region in 2021 recording record figures for startup fundraising and exits.
M25's rankings spotlights the two largest startup exits by St. Louis companies within the past year: Deals by food technology firm Benson Hill and online learning company Nerdy to become publicly traded firms through mergers with special purpose acquisition companies. Both deals valued the two startups at more than $1 billion, minting them as so-called unicorns and marking a celebratory moment for St. Louis' startup ecosystem. While the share prices of Nerdy and Benson Hill have dropped since their public market debuts, the CEOs of the two companies recently told St. Louis Inno they have no regrets about the deals, saying they believe they are positioned well for future growth.
Thanks to the Covid-19, the experience of building a company in St. Louis has changed since M25's first ranking.
The pandemic brought a remote-centered world, and the challenges that used to exist for Midwest startups, like raising capital from the best investors across the country and accessing experienced talent, have lessened, they said.
In St. Louis, local startup have said the pandemic created easier access to major sources of capital located on the coasts, in regions like Silicon Valley and New York.
“It was hard to get investors to come outside their core cities and commit more time, travel and money to something they aren’t connected with, and furthermore the experienced talent that’s worked in startups and seen a product go from seed stage to IPO has been lacking in the Midwest,” said M25 Managing Partner Victor Gutwein. “That’s been changing pretty fast because you can hire somebody to your team that isn’t necessarily based in Chicago and you can supplement what you can find locally with people on a national or international level.”
The rise of remote work also led to smaller cities rising in the rankings.
“We saw smaller communities like Bloomington, Lexington, Columbia — these more traditional college towns that have a good quality of life — really jumped up in the rankings this year, surpassing larger cities,” Gutwein said.
Still, the larger metropolitan areas remain best for scaling up operations.
You can see the entire M25 ranking here.
